Shares in insulation manufacturer Superglass plummeted almost 38 per cent today on news it had completed a discounted share placing to raise £6.3 million.

The Stirling-based company said it placed 125 million new shares at five pence per share - offered to “institutional and sophisticated private investors” at a near 49 per cent discount on the Monday closing price of 9.75 pence.

Superglass said the money raised would be used to fund further operating cost reduction measures, provide working capital and finance trading losses in the current financial year.

Swedish private equity firm Bronsstädet AB has provisionally subscribed to 60 million of the new shares, which represents roughly 39 per cent of the new shares issued under this latest capital restructuring plan, Superglass said.

The group notes in a stock market statement: “Independent Shareholders are being asked to approve a resolution to allow Bronsstädet AB's participation in the Placing without triggering the requirement for Bronsstädet AB to make an offer to acquire the remaining New Ordinary Shares under Rule 9 of the Code.”

The Superglass board has urged shareholders to vote in favour of the resolutions at a general meeting to be held on October 30, as having “already explored alternative options to the Placing, including a sale of the principal operating subsidiary”, it is the judgement of the board “none of these options is likely to deliver any meaningful value to Shareholders”.

News of the share placing saw shares in AIM-listed Superglass drop 3.7 pence to 6.05 pence in early Tuesday trading.

Superglass chairman, John Colley, said: “We are pleased to announce the £6.25 million placing and details of the company's new banking facilities with Close Brothers.

“We are delighted with the on going support from existing investors, as well as support from new investors including Mr Peter Gyllenhammar who, on completion, will have a meaningful stake in the company.

“The Board believes that the placing will provide Superglass with a considerably strengthened and sustainable long term capital structure.

“The Company continues to be well placed to benefit from any resurgence in market volumes and the efficiencies from its on going capital investment programme.

“The Board looks forward to welcoming a representative of Mr Gyllenhammar to the Board in due course.”

This latest share issue takes the total number of shares in issue to 28.01 million, and on Tuesday's trading, Superglass has a market capitalisation of £1.68 million.

Superglass, which employs around 170 people in Stirling, has also announced today it has secured a new £4.8 million banking facility with Close Brothers, which the company said replaces an existing loan with Clydesdale Bank, which will be “repaid at a discount of 15 per cent. to the principal amount outstanding of £2.5 million”.

The new facility “will be available for draw down following Admission, with the available level largely determined by the balance of trade debtors from time to time,” Superglass said.

In a statement to the stock exchange, Superglass said: “As an alternative to the Placing, the board has considered a number of options to improve shareholder returns, including a sale of the principal trading subsidiary.

“Following this detailed exercise, the Board believes that a programme of continued infrastructure investment financed through a further injection of capital will improve operational efficiency whilst enhancing customer and supplier confidence, and represents the best available strategy to create shareholder value.”

In May 2013, the Superglass board had warned shareholders to accept what was a new £12.2 million share placing if the company is to avoid insolvency, a move which saw its share price plummet 60 per cent.

Under the terms of the May 2013 refinancing, Clydesdale Bank – which agreed a debt for equity deal in 2011 to convert £12.15 million in loans to to shares - the group's £12 million debt to Clydesdale Bank, including deferred fees from an earlier debt-for-equity refinancing agreement, would be reduced to £2.5 million.

Superglass states: “As a result of the settlement of Clydesdale Bank's outstanding liability, Clydesdale Bank would be entitled to convert the Convertible Shares into 2,800,757 Ordinary Shares, representing 1.8 per cent of the New Ordinary Shares.

“The new facilities will provide the headroom required to meet the company's currently foreseeable trading needs, but will not be adequate to fund the additional cost saving initiatives described...or further material trading losses.”

Superglass said it has identified “potential incremental annual cost savings of approximately £1.9 million, which would require capital investment of approximately £1 million to implement and would include a significant reduction in manufacturing capacity”.

Last November, Superglass reported a £7 million pre-tax loss for the 2013 year to August after revenues slumped by almost a quarter to £24.3 million.

Superglass had stated insulation measures completed in 2013 under Green Deal and ECO combined were “running at between 80 and 90 per cent below 2012 levels”.

The group notes today, demand from government-backed schemes has remained “at negligible levels” though demand from the construction sector “is showing good growth fuelled by new build housing activity and commercial construction”.

“Responding to this ongoing trend the Company has been repositioned to focus on construction markets, with sales to that sector now accounting for 80 per cent of UK revenues compared to 30 per cent. four years ago,” the company said.

It added: “There was nonetheless an upturn in trading during the final quarter of the financial year ended 31 August 2014, driven by a step change in sales volume and this is a clear reflection of the progress that has been achieved.

“As well as recent increases in volumes, there have been improvements in product mix, with growing sales of higher margin products.